1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________.
Commission file number 1-5725
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Quanex Corporation Employee Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Quanex Corporation
1900 West Loop South, Suite 1500
Houston, Texas 77027
Phone: (713) 961-4600
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INDEPENDENT AUDITORS' REPORT
The Benefits Committee
Quanex Corporation
Houston, Texas
Re: Quanex Corporation Employee Savings Plan
We have audited the accompanying statements of net assets available for
benefits of the Quanex Corporation Employee Savings Plan (the "Plan") as of
December 31, 1995 and 1994, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1995 and 1994, and the changes in net assets available for benefits for the
years then ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of (1) investments as of December 31, 1995 and (2) 5% reportable transactions
for the year ended December 31, 1995 are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements, but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These schedules are the responsibility
of the Plan's management. Such schedules have been subjected to the auditing
procedures applied in our audit of the basic 1995 financial statements and, in
our opinion, are fairly stated in all material respects when considered in
relation to the basic financial statements taken as a whole.
/s/ DELOITTE & TOUCHE LLP
- --------------------------
DELOITTE & TOUCHE LLP
May 3, 1996
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QUANEX CORPORATION EMPLOYEE SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
----------------------------
1995 1994
---------- -----------
Assets:
Investments at fair value -
Mutual fund assets:
Fidelity Puritan Fund $ 6,212,219 $ 4,833,853
Fidelity Magellan Fund 8,297,683 6,361,895
Fidelity Contrafund 1,126,654 283,117
Fidelity Growth and Income Fund 2,098,750 1,135,850
Fidelity Overseas Fund 1,573,296 1,573,029
Fidelity Balanced Fund 158,122 111,318
Fidelity Government Money Market Fund 10,910,320 8,981,007
Quanex Corporation common stock 1,519,737 1,418,636
Common/commingled trust 1,244,993 471,972
----------- -----------
33,141,774 25,170,677
Deposits with insurance company,
at contract value - 896,472
----------- -----------
Total 33,141,774 26,067,149
----------- -----------
Employee contributions receivable 449,920 450,534
Employer contributions receivable 128,560 150,335
----------- -----------
Total 578,480 600,869
----------- -----------
Net assets available for benefits $33,720,254 $26,668,018
=========== ===========
See notes to financial statements.
4
QUANEX CORPORATION EMPLOYEE SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
December 31,
-------------------------------
1995 1994
----------- -----------
Investment income:
Interest and dividends $1,708,988 $1,203,950
Net appreciation (depreciation) in
fair value of investments 2,926,558 (532,717)
----------- -----------
Total 4,635,546 671,233
----------- -----------
Contributions:
Employer 969,303 892,899
Less forfeitures 8,913 9,282
----------- -----------
960,390 883,617
Employee 3,734,966 3,231,908
----------- -----------
Total 4,695,356 4,115,525
----------- -----------
Total additions 9,330,902 4,786,758
Benefit payments 2,278,666 1,637,977
----------- -----------
Increase in net assets available
for benefits 7,052,236 3,148,781
Net assets available for benefits:
Beginning of year 26,668,018 23,519,237
----------- -----------
End of year $33,720,254 $26,668,018
=========== ===========
See notes to financial statements.
5
QUANEX CORPORATION
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
A. THE PLAN
The following brief description of the Quanex Corporation Employee
Savings Plan (the "Plan") is provided for general information purposes
only. Participants should refer to the Plan agreement for more
complete information.
1. General. The Plan became effective April 1, 1986, as amended
and restated effective January 1, 1989, and is sponsored by
Quanex Corporation (the "Company"). The Plan is a defined
contribution plan which is subject to the Employee Retirement
Income Security Act of 1974 ("ERISA"). The Plan is a
voluntary savings plan in which employees of the Company and
its subsidiaries, excluding its Nichols-Homeshield divisions
and those Quanex employees who are covered by a collective
bargaining agreement, are eligible to participate after
completing three months of active service. The assets of the
Plan are held in trust by Fidelity Management Trust Company
("Fidelity" or the "Trustee"). The Benefits Committee (the
"Committee"), appointed by the Board of Directors of the
Company, serves as the Plan administrator.
2. Contributions. Participants may elect to contribute up to 15%
of their pre-tax annual compensation or up to 15% of their
after-tax annual compensation limited to 15% of considered
compensation as defined by the Plan agreement. The Company
matches 50% of the employee's contribution up to, but not in
excess of, 2.5% of the employee's annual compensation.
3. Participants Account--Each participant's account is credited
with the participant's contribution, the Company's matching
contribution, and an allocation of investment income, which is
based on the participant's account balance as of the end of
the period in which the income is earned.
4. Investment Options--The Plan offers the following investment
funds, all managed by the Trustee, as follows:
Government Money Market Fund--composed of short-term
government obligations.
Puritan Fund--invested and reinvested in common and preferred
stocks and bonds.
Magellan Fund--invested and reinvested in equity and debt
securities of foreign and domestic companies.
Growth and Income Fund--invested and reinvested in equity and
debt securities of foreign and domestic companies.
Overseas Fund--invested and reinvested in foreign securities.
Quanex Corporation Common Stock--invested and reinvested
exclusively in the common stock of Quanex Corporation.
Common/Commingled Trust--invested and reinvested in investment
contracts issued by insurance companies, banks and other
financial institutions.
Balanced Fund--invested and reinvested in common and preferred
stocks and bonds.
Contrafund--invested and reinvested in equities of foreign and
preferred stock.
Additionally, the Plan had investments in a series of guaranteed
investment contracts, which matured January 1, 1995. Refer to Note C
for further discussion.
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5. Vesting. Participants are immediately vested in their
voluntary contributions and the related earnings. Vesting in
the employer's matching contributions for employees is 0% for
less than one year of service graduating to 100% for five or
more years. Upon death, retirement or total permanent
disability, the participant or beneficiary becomes immediately
100% vested in the employer's contribution. In the event of
termination, nonvested portions of employer's contributions
are immediately forfeited by participants and utilized to
reduce future employer matching contributions.
6. Payment of Benefits. Upon termination of service, the
participant may elect to receive a lump-sum amount equal to
the amount of vested benefits in his or her account. See
further discussion of benefits payable in Note G.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Accounting Basis. The financial statements of the Plan are
prepared on the accrual basis of accounting in accordance with
generally accepted accounting standards.
2. Investment Valuation. The Plan recognizes net appreciation or
depreciation in the fair value of its investments.
Investments are reflected at fair value in the financial
statements. Fair value of mutual fund assets is determined
using a quoted net asset value. Fair value for Quanex
Corporation common stock, which is listed on the New York
Stock Exchange, is determined using the last recorded sales
price.
3. Administrative Expenses. The Company pays all administrative
expenses.
4. Payment of Benefits. Benefit payments are recorded when paid.
C. DEPOSITS WITH INSURANCE COMPANY
On December 1, 1988, the Plan entered into a series of guaranteed
investment contracts with Metropolitan Life Insurance Company
("Metropolitan"). The contracts provided a guaranteed rate of return
on principal invested which was credited to the Plan for the length of
the contracts. The contracts were reduced for Plan withdrawals. The
contract was included in the financial statements at the December 31,
1994 contract values as reported to the Plan by Metropolitan. These
contracts matured on January 1, 1995. The contracts provided an
interest rate of 8.3% per annum.
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D. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to terminate the Plan subject to the provisions
of ERISA. In the event of termination of the Plan, the assets held by
the Trustee under the Plan will be valued and fully vested, and each
participant will be entitled to distributions respecting his or her
account.
E. FEDERAL INCOME TAX STATUS
The Plan is subject to specific rules and regulations related to
employee benefit plans under the Department of Labor and the Internal
Revenue Service ("IRS"). The Plan is a qualified trust under Sections
401(a) and 401(k) of the Internal Revenue Code (the "Code") and, as a
result, is exempt from taxation under Sections 501(a) of the Code.
The Plan received a favorable determination letter from the IRS dated
December 22, 1994. The Company believes that the Plan is currently
designed and being operated in compliance with the applicable
requirements of the Code. Therefore, it believes the Plan was
qualified and the related trust was tax-exempt as of the financial
statement dates.
F RELATED PARTY TRANSACTIONS
During the years ended December 31, 1995 and 1994, the Plan purchased
shares of Quanex Corporation common stock, as shown below:
1995 1994
---- ----
Shares Cost Shares Cost
------- ---- ------ ----
31,540 $656,408 29,219 $632,545
During the years ended December 31, 1995 and 1994, the Plan sold
15,119 and 20,146 shares of Quanex Corporation common stock for
$368,385 (cost $322,891) and $574,779 (cost $470,005), respectively.
During the years ended December 31, 1995 and 1994, the Plan purchased
shares of Fidelity mutual fund assets, as shown below:
1995 1994
---- ----
Shares Cost Shares Cost
------ ---- ------ ----
5,924,023 $13,115,404 5,226,865 $12,369,613
During the years ended December 31, 1995 and 1994, the Plan sold
3,911,470 and 3,738,549 shares of Fidelity mutual fund assets for
$9,131,908 (cost $8,630,838) and $9,480,794 (cost $9,567,946),
respectively.
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During the years ended December 31, 1995 and 1994, the Plan purchased
shares of Fidelity Common/Commingled Trust, as shown below:
1995 1994
---- ----
Shares Cost Shares Cost
------- ---- ------ ----
952,231 $952,231 471,972 $471,972
During the years ended December 31, 1995 and 1994, the Plan sold
179,211 and -0- shares of Fidelity Common/Commingled Trust for
$179,211 (cost $179,211) and -0-, respectively.
G. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
As of December 31, 1995 and 1994, net assets available for benefits
included benefits of $221,024 and $152,480, respectively, due to
participants who have withdrawn from participation in the Plan. As of
December 31, 1994, benefits payable of $152,480 were reported as a
liability on the ERISA Form 5500, resulting in a difference between
net assets available for benefits presented within this report of
$26,668,018 and the net assets recorded on Form 5500 of $26,515,538.
During 1995, the Department of Labor clarified its definition of
benefits payable, which resulted in no liability for benefits payable
on Form 5500 as of December 31, 1995. The following is a
reconciliation of benefit payments according to the financial
statements to Form 5500 for the year ended December 31, 1995.
Benefit payments per the financial statements $2,278,666
Amounts allocated to withdrawing participants
December 31, 1994 (152,480)
----------
Benefit payments per Form 5500 $2,126,186
==========
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H. SUPPLEMENTAL FUND INFORMATION
Contributions, benefit payments and investment income by fund are as
follows for the years ended December 31:
1995 1994
---------- -----------
Employee Contributions:
Fidelity Puritan Fund $ 667,357 $ 618,173
Fidelity Magellan Fund 1,139,936 931,840
Fidelity Contrafund 126,372 22,885
Fidelity Growth and Income Fund 230,475 165,518
Fidelity Overseas Fund 230,121 233,420
Fidelity Balanced Fund 26,265 9,944
Fidelity Government Money
Market Fund 1,109,768 933,609
Fidelity Short-Intermediate
Government Fund - 176,018
Quanex Corporation common stock 122,282 122,880
Common/commingled trust 82,390 17,621
---------- -----------
$3,734,966 $ 3,231,908
========== ===========
1995 1994
---------- -----------
Employer Contributions:
Fidelity Puritan Fund $ 178,592 $ 170,977
Fidelity Magellan Fund 256,350 246,621
Fidelity Contrafund 31,385 6,245
Fidelity Growth and Income Fund 56,557 39,756
Fidelity Overseas Fund 61,502 59,756
Fidelity Balanced Fund 7,216 2,406
Fidelity Government Money
Market Fund 313,266 286,916
Fidelity Short-Intermediate
Government Fund - 31,863
Quanex Corporation common stock 37,418 34,713
Common/commingled trust 18,104 4,498
Guaranteed Investment Contract - (134)
---------- ----------
$ 960,390 $ 883,617
========== ==========
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1995 1994
---------- ----------
Benefit payments:
Fidelity Puritan Fund $ 382,406 $ 106,709
Fidelity Magellan Fund 441,687 303,081
Fidelity Contrafund 4,154 -
Fidelity Growth and Income Fund 78,206 12,479
Fidelity Overseas Fund 143,802 47,678
Fidelity Balanced Fund 1,628 -
Fidelity Government Money
Market Fund 1,171,681 844,938
Fidelity Short-Intermediate
Government Fund - 160,139
Quanex Corporation common stock 42,219 107,585
Common/commingled trust 12,883 -
Guaranteed Investment Contract - 55,368
---------- ----------
$2,278,666 $1,637,977
========== ==========
1995 1994
---------- ----------
Investment income:
Fidelity Puritan Fund $1,062,499 $ 53,117
Fidelity Magellan Fund 2,263,096 (129,828)
Fidelity Contrafund 181,608 1,910
Fidelity Growth and Income Fund 489,667 15,101
Fidelity Overseas Fund 126,585 (2,135)
Fidelity Balanced Fund 14,721 (3,111)
Fidelity Government Money
Market Fund 585,772 322,411
Fidelity Short-Intermediate
Government Fund - (35,388)
Quanex Corporation common stock (145,524) 368,683
Common/commingled trust 57,122 9,681
Guaranteed Investment Contract - 70,792
---------- ----------
$4,635,546 $ 671,233
========== ==========
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Item 27a - Schedule of Assets Held for
Investment Purposes EIN:
38-1872178; PN 012
QUANEX CORPORATION
EMPLOYEE SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
Shares/ Current
Par Value Cost Value
----------- ----------- ------------
Mutual Fund Assets - Fidelity Investments:
- ------------------------------------------
Contrafund* 29,633 $ 1,068,308 $ 1,126,654
Government Money Market Fund* 10,910,320 10,910,320 10,910,320
Puritan Fund* 365,210 5,671,392 6,212,219
Growth and Income Fund* 77,588 1,764,716 2,098,750
Magellan* 96,507 6,991,300 8,297,683
Overseas Fund* 54,121 1,454,502 1,573,296
Balanced Fund* 11,695 151,359 158,122
------------ ------------
Total Mutual Fund Assets 28,011,897 30,377,044
Quanex Corporation Common stock* 78,438 1,616,434 1,519,737
Common/Commingled Trust* 1,244,993 1,244,993 1,244,993
------------ ------------
Total investments $ 30,873,324 $ 33,141,774
============ ============
* Party-in-Interest
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Item 27d - Schedule of Reportable (5%) Transactions EIN 38-1872178; PN 012
QUANEX CORPORATION SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF 5% REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
Series of Transactions
Total Number of Total Number
Purchases During Purchase of Sales During Selling
Description Plan Year Price Plan Year Price
- ----------- ----------------- --------- --------------- -------
FMTC Government Reserve 3 $896,511
4 $897,014
Puritan Fund 118 1,801,711
80 1,162,854
Magellan Fund 149 2,874,768
100 2,727,783
Growth & Income Fund 98 987,008
34 415,235
Contrafund 93 1,051,221
27 301,572
Government Money Market Fund 162 5,675,531
147 3,746,218
Current
Value On Net
Cost of Transaction Gain
Description Asset Date (Loss)
- ----------- ------- ----------- ------
FMTC Government Reserve
$897,014 $897,014 $ 0
Puritan Fund
1,124,553 1,162,854 38,301
Magellan Fund
2,348,589 2,737,783 379,194
Growth & Income Fund
388,671 415,235 26,564
Contrafund
262,639 301,572 38,933
Government Money Market Fund
3,746,218 3,746,218 0
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Quanex Corporation Employee Savings Plan
Date: June 24, 1996 /s/ JOSEPH K. PEERY
------------------------- ----------------------------------------
Joseph K. Peery, Benefits Committee
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INDEX TO EXHIBITS
23.1 -- Independent Auditor's Consent
1
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-38702 of Quanex Corporation on Form S-8 of our report dated May 3, 1996
appearing in the Annual Report of Form 11-K of the Quanex Corporation Employee
Savings Plan for the year ended December 31, 1995.
/s/ DELOITTE & TOUCHE LLP
- ---------------------------
DELOITTE & TOUCHE LLP
Houston, Texas
June 24, 1996
